Economics: Growing Chinese presence in Mexico’s automotive sector sparks concern in the US, posing risks to Mexico under the USMCA
China's increasing presence in the Mexican automotive sector has drawn considerable expressions of dissatisfaction among US authorities and politicians, as well as from US labor unions, objections that have been exacerbated this key election year. Both President Joe Biden and candidate Donald Trump have announced measures they would apply against Mexico for a lack of proper monitoring that is allegedly allowing China to establish a major beachhead from which it may be triangulating its products. Likewise, several analysts have argued that the Ministry of Economy’s figures for Chinese Foreign Direct Investment in Mexico represent only a tiny fraction of what Chinese companies are actually injecting. Obviously, this is a point of concern on the part of the United States.
An analysis of the behavior of automobile sales shows that vehicles imported from China have gained a very substantial domestic market share, displacing domestic production that has tended to concentrate more on exports to the US. After the US presidential elections, it can be expected that the winning candidate will try to put more pressure on Mexico, which could lead to unilateral sanctions, procedures within the USMCA or a renegotiation of the treaty in 2026 under the “Sunset clause”, which could lead to changes of the treaty in ways disadvantageous for Mexico.
This week’s Outlook analyzes the recent evolution of China's presence in the Mexican automotive sector and its possible implications for the coming years.
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